Limelight Sells EyeWonder Business, Still Working On Bigger Transformation

This morning, Limelight Networks announced it would sell their EyeWonder business to DG Fast Channel for $66M in cash. Limelight originally paid $110M for the business last year, so the sale to DG Fast Channel comes at a loss. Limelight also announced that they would buy back $25M of their stock, or about 8% of their outstanding shares.

As I reported earlier in the month, Limelight has been in discussions with Level 3 about merging both company's CDN businesses and the first step Limelight needed to do was was get out of the interactive advertising market and focus only on their CDN and SaaS based platforms. I'm hearing that Level 3 and Limelight are still in talks, but no deal is done and there is no guarantee it will happen. Today the Office of Fair Trading (OFT) announced they had "cleared" the Level 3 and Global Crossing merger and the full text of the decision will be available shortly on their website. So that now makes a Level 3 and Limelight deal much easier to accomplish.

Limelight clearly wants their share price to be higher so that they get a bigger buyout from Level 3, but there is no guarantee that will happen. If Limelight's share price goes up and they can an $8-$10 share buyout from Level 3, then I think the deal will get done. But, Level 3 may just sit back and wait a few months and see what happens. If Limelight does not grow revenue the rest of the year, then Limelight won't get the buy out they want and would have to sell any way, with Level 3 benefiting from the lower price.

But if you are Level 3, you don't want to wait too long to acquire the company as you still want to acquire them when their CDN business is strong. So it's really going to come down to timing on this one. With all these factors in play, I would not be surprised if it takes till the end of the year before this plays out. Limelight does not have a lot of options in the market and Microsoft, Verizon and AT&T have already all passed on acquiring them. So either way, Limelight is going to have to do something in the market soon, but I think it will probably be a few months before it happens.